By Omoh Gabriel
On our report of march 23rd on the basis of which people talk about agenda, most of the issues raised have reflected that report. and then continuous examination of banks, it‚Äôs like all the steps spelt out on special examination were not followed before your August 14 action.
Honestly on your march 23rd report, I do not know what to make of it. I‚Äôm aware that there were these 2 other newspapers that said they had that report or that they were called or sent something similar to them on e-mail but did not publish it. may be you did an interview or it was an original thing or one of those things from reliable sources, as it were. You talked about agenda and all that, but you noticed that at that time, that report came out when there was a question of succession to the office of the central bank governor, and for me it was just about taking a decision that you will support a particular line of action from the government.
I read the document, in fact I read it after the action and I could see clearly the context in which it was written, should the governor be given to a new person and who. And I saw that as one of those things.
the second thing is, if you think I have a norther agenda, my telling you that I do not have a northern agenda will not convince you.. So let us forget the issue of whether or not I have a northen agenda. Do you agree that if a bank has a bad loan of N300 billion, that bank is in a grave situation? that is the question, forget what my agenda is. If we agree on that, that is all that matters. Because I removed those MDs, because their banks were in a grave situation. I didn‚Äôt remove Akingbola because he is Yoruba man. I didn‚Äôt remove Mrs Ibru because she is Urhobo, so if I have a northern agenda or not is not even the issue. The issue is what was the basis for removing them, because their institutions were in grave situations.
Secondly, let‚Äôs take it for granted that I have a northern agenda, how will this unfold. I take this particular bank as the governor of central bank and then call on northerners to come and buy them, is that how it will work? In fact I have seen a newspaper where it says the investors lined up to buy these banks are fronting for northerners. So who are these northerners that can buy these banks? Northerners that could not keep a bank when capital was N25 billion. Where are they going to get the N100, N200 billion that they will require to buy them? It will be a very stupid agenda. If I had an agenda that was northern, an agenda that was not national, why would I take so much efforts to save southern banks? I would just let them go and tell the nation it is consolidation. Why should I save the banks? who will suffer most? Northerners? How many northerners own a bank? There is an inherent contradiction in the allegation. If northerners do not have stake in banking or their stake is minimal and they are unhappy, a northern agenda would be to just let theses banks go under.
On the issue of special examination, People are mixing a routine examination with a special examination. in the BOFIA act they are two separate examinations. Special examination is ordered by the governor of the central bank, it does not go through all the steps, secondly, in the context of my action of August 14, I did not even require a special examination. All that I require is to arrive at a judgement that a bank is in a grave situation and act whether that judgement is arrived at through a special examination or by whatsoever means howsoever. The question is if I say Intercontinental bank is in a grave situation, what I should asked is how did I arrive at that judgement? How I arrived at the judgement, I have spelt out the process – the people I sent, the report they presented, the people that looked at the report and the conclusion ( Sanusi, Sarah Alade, Lemo, Barau, Ogunleye, Prof. Omoh and Umar) the governor of central bank, MD of NDIC and their management team, plus the director of banking supervision and the director of banking examination. That together having gone through that process concluded that this banks are in grave situation. Now you can question that.
Thirdly, a banking licence is not a civil right thing and it is not a human right, it is a privilege. I give you the licence that allows you to take deposit from people, on the condition that you operate the bank in a particular way. If you do not operate that bank in that way, I can remove you. I do not need a high court to withdraw that licence. If you like you can challenge the action and honestly I don‚Äôt need a court order to remove you. You will notice that the letters removing those Managing Directors did not level allegations against them. The MDs and their executive directors were removed because their banks were in grave situations. Having removed them we handed over the report of our examinations to EFCC, where we felt that there were infractions that warranted investigations and prosecution.
It is the EFCC, not CBN, that is investigating and prosecuting, yes it is true that in the process of gathering evidence, they have to work with CBN/NDIC examiners who were the first to trace the problems to show them where they saw the problems. So our examiners are assisting them in putting together the information required, and obviously they are going to be prosecuting witnesses in the court of law. But I did not remove any bank MD on account of a criminal activity, we removed bank MDs on account of their banks being in a grave situation.
Why is Equatorial Trust Bank being treated differently after the CBN action
Recapitalisation, I think there is a realm of speculation. Bala Usman always told me in the university that we should name names. Talking about equatorial trust bank, ETB is not a listed bank, ETB is only one per cent of the market. Nothing in the examination report of the ETB suggested that Mike Adenuga has been involved in any major infraction. I will not tell you that there were no issues, but these issues are the same we found in other institutions and we handled in a regulatory manner. It is a bank with a narrow capital base, a bank with a very narrow shareholder base and we felt there was overbearing influence of a key shareholder on the bank. Fine they had issues, the substantial part of the loan books was exposed to companies related to the key shareholder. We also felt that the bank did not have enough capital and in removing the management, we removed the key shareholder from the board because he was also related to the companies that were borrowing. Immediately after that, he did not fight or resort to court, he said if the problem is that these loans are not performing I will immediately make provisions for them, he brought in money and paid up all. He also said I‚Äôm bringing in money to recapitalise the bank. I as the central bank governor does not see ETB continuing for a long time this way. It‚Äôs very clear, I‚Äôm not going to allow a bank to have this kind of narrow shareholders base. shortly after he submitted a letter committing to dilution of the shareholder base, committing to work with the CBN towards mergers and acquisition.. Unless I‚Äôm being vindictive, I have to ask myself you can‚Äôt just treat everybody this same way. There is no case of crime against this man. He‚Äôs paid up the loans, he‚Äôs brought in the capital, he has agreed to dilute the shareholder base of the bank and go through a Merger acquisition process. Why would I not accept that from? If I refuse his position will you not think I‚Äôm unreasonable?.
In the second phase spared Wema to protect Unity Bank was that not part of the grand plan?
Now on the bank that are recapitalising – unity bank – by the time we audited, they didn‚Äôt have enough capital. liquidity ratio – 41 per cent, over 40 per cent constantly. by definition, that bank is not in a grave situation. there is no risk of not meeting depositors fund. So unless I was just to bring them the management of unity bank to prove that I don‚Äôt have a northern agenda, there was no basis to take such action. however, it is not sustainable. If they don‚Äôt capitalise in the next couple of years, they will have issues. So we gave them a deadline to recapitalise.
Wema – Why would we change the management of Wema. the bank is in a grave situation, the management came in just 2 months ago when new shareholders bought it. We can‚Äôt hold them responsible for the situation the bank is in. every action we took on every bank I can defend it.
The CBN gave 14 banks after consolidation $7 billon part of foreign reserve to manage, about $500 million each are some of the troubled banks involved? Constant mop up of excess liquidity by CBN, and yet so much money is constantly being pumped into the system from sharing the federation account why is the money not distributed to states and local governments in dollars?
First, let me say that there is no money locked up in any bank. Out of the 24 banks in Nigeria, there is no bank you will go to that you will not get your money. What we have done is to make sure that those that have issues have enough money to pay you. We will sort out how we get paid back later. That is the whole idea of the bail out.
The former CBN governor had tried very hard to his credit to get the government to accept that the revenue that accrue in dollars into the federation account be distributed in dollars. It was not possible for constitutional reasons and for the use of legal tender. Constitutional reason – there is a particular way that revenues coming into the federation accounts is specified to be shared. There is nothing anybody can do until that constitution is amended. For the CBN it is a situation you are dealing with a circumstance that is actually beyond CBN‚Äôs control but the responsibility of the CBN in managing does not fall off. So if there is excess liquidity in the system, it is the CBN‚Äôs responsibility to mop up the excess, if there is a liquidity shortfall it is CBN‚Äôs responsibility to inject liquidity in order to preserve macro-economic stability.
Now why you have not seen inflation in spite of the money injected into the system is because in my view our money supply estimates were always exaggerated by the sheer volume of non performing loans. In theory you think you have a credit but if the loans are bad the credit is not there. What you are seeing now is that N1 trillion or so out of all those loans were actually gone. If for instance, I take N1 trillion of my balance sheet as either a margin loan or whatever, and I take it to the stock market and the stock market loses 70 per cent of its value, that is N 700 billion burnt off – it‚Äôs not there. On paper I have it, but it is not there and it will never come back until the stock market rebounds.
So what we actually have is that we are injecting money but we are not anywhere near where we should be, given the requirement of the economy for sustainable growth. We have a fairly stable exchange rate. As of today it is N150 to a dollar that we have, I see it as an equilibrium. How do I define it? It is the level around which I can sustain the exchange rate without depleting the nation‚Äôs foreign reserves. Keeping the naira around that level and having stability is crucial for the formation of price expectation, crucial for long term investment decisions and it is far more important for you as an investor or borrower to know that the naira is likely to remain around this level for a long time than for me to hurriedly appreciate or depreciate it. Whether the naira is 120, 150 or 180, that is not the issue. any argument can be made for where it is. One it has stabilised around an equilibrium level, what is important is to manage expectations and appreciably try not to intervene. However, if I feel that the naira is a victim of a speculative attack, then I will not hesitate to act.
The nation has a much bigger balance sheet, about $40 billion, so the country should be able to defend its currency from being debased by small players. and we have done it so well, we have brought the management of 8 banks down and we have not seen any panic, because people still feel that at any given time they can get their money out.
Erastus Akingbola accused you of De-marketing Intercontinental Bank and you were asked to apologise to him by your predecessor in office is that why you have not forgiven him
There was never any time I was told to apologise and secondly to the best of my knowledge, Mr Akingbola never accused me personally of de-marketing, he never did. What I know happened was this. Two staff of First Bank went to the governor of Jigawa state on a marketing call, three staff. The governor said to them, we are hearing that some banks had liquidity problems. You should advice us because we deposits in these banks, and you are the ones in the industry. My treasury is telling me that some banks are having problems. Tell me if there are issues so that I can move the money. The team was led by an executive director who has just joined first bank, he has not settled in. He said yes it is true that some banks have issues. The governor then asked them what about Intercontinental Bank, is it one of the banks? And he said it is one of those that we hear. Now the governor then picked up the phone called the treasury that they should move their money from Intercontinental, that this thing that they were saying, he has confirmed from senior bankers.
Now, one of the directors of Intercontinental is from Kano and he spoke with the governor, it was either he called the governor or the governor called him when he learnt from the Governor what has happened he told him that it was de-marketing and he called Akingbola and informed him.
I called Akingbola myself at the time and he told me that he had received a report that three senior member of staff of First Bank had done that to his bank. And I told him, give me a letter and the names of the staff. He wrote the letter and copied the governor of CBN then, I did not discuss this it with Professor Chukwuma Soludo as it was not a matter for discussion. He listed three officers in the letter and I queried all three – the two junior ones came back with a report explaining what happened how a discussion held with the most senior member of the group who was an executive director – whom we gave a warning in writing, to desist from de-marketing. He was invited by the chairman of the board and was told that even though we understood that he did not go to de-market a bank, but that in his position of seniority he should have known better than to allow himself to be thrown into that kind of situation. That is as much as we can do with a senior person in the bank. I‚Äôm not going to sack an executive director because he made that statement.
If you notice I do not defend myself, and I ordered the corporate affairs department of CBN not to respond. To the best of my knowledge, First Bank was one of the first banks – and that was when Ajekigbe was the MD – that had a policy warning staff that they will be sacked for de-marketing. I did not take this as an issue at all. I was the MD of First Bank only for five months. I‚Äôve heard people say this was the reason we sacked Akingbola. Okay how about Mrs Ibru, or Afribank or any of the other banks? It is not an issue – all these de-marketing, northern agenda – as I said, let us even assume that we have that problem, does it change the fact they have a N300 billion bad loan? This is what it is all about, it is about the condition of the financial institutions. On the de-marketing allegation, I don‚Äôt think as governor of CBN I should engage the media on this. This happened anyway when I was the MD of First Bank, which is a previous role.
Leaving out Unity Bank management when the bank failed capital adequacy test and some debtors claiming they are banks because they borrowed to execute government contracts for which they have not been paid. What are your reactions?
I made the case of Unity Bank very clearly, Unity Bank does not have enough capital which means in the medium to long term, that bank can fail, if it does not get fresh capital injection it will collapse. Unity is not in a grave situation because there is no risk, no capital risk that at this moment it has any difficulty in meeting its obligations to customers and creditors. So, they have been given a deadline to raise capital. we‚Äôll appoint advisers for them if need be, we‚Äôll work with them on the capital raising plan and they will have to comply with that.
Unity Bank has one of the strongest liquidity profiles of all the banks, largely because of the northern governments, because of the legacy of bank of the north. There are some banks that are like that because of government funds, and they are very liquid.
Now on the issue of government debts, you know part of what killed the banks, not government debts Take the case of Transcorp, we know banks that lent money to Transcorp, $650 million. It was a bad loan, it was not performing. They were not forced to provide because it was Transcorp. We did the audit and said take 100 per cent. They said it‚Äôs Transcorp, I said go and follow your money, take 100 per cent. What has happened now? They have paid back. If we had not brought a provision on Transcorp the bank would not have recovered a kobo, until NITEL is sold. It‚Äôs not my business who you gave the loan to. I run a bank, if you come to me and it is a government contract, it is my responsibility to assess the risk of government not paying you before I lend people‚Äôs money to you. If government finds that the contractors are not getting loans because government is not paying, government will soon begin to learn that it either works on cash and carry basis or it should begin to establish credibility. If a loan is bad, it is bad – whether you lend to government or lend to your governor or lend to CBN governor – that is not business the issue, when a loan is bad it‚Äôs a bad loan.
Some of the people saying that government owes them, they have not done their job. They have taken money, they are contractors, but they have not done the job. Some of then have done the job, and they have met the condition for payment. Well, we have asked the president and he has authorised that any verifiable government debt, be paid – to contractors owing banks. That was clear. The $2 billion that was given to states from the excess crude account, priority was for payment of any debt that the states owed people who are owing banks. We‚Äôve done our bit.